Outsourcing $($Make$-$or$-$Buy$)$ Decision

Direct materials $$8\mathrm{.}00$

Direct labor $,1\mathrm{.}50$

Factory overhead $5\mathrm{.}00$

Total $$14\mathrm{.}50$

These cost predictions include $$40,000$ in facility$-$level fixed factory overhead averaged over $10,000$ units.

The electric motor's components will cost $$3\mathrm{.}00$ if Mountain Air assembles the motors.

Calculate the net advantage $($disadvantage$)$ of outsourcing the electric motors from Mini Motor Company.

Use a negative sign with your answer to indicate a net disadvantage of outsourcing $($if applicable$).$

$($b$)$ If it could otherwise rent the motor$-$assembly space for $$22,000$ per year, should it make or outsource this component?

Calculate the net advantage $($disadvantage$)$ of outsourcing the motors, assuming the space could be rented.

Use a negative sign with your answer to indicate a net disadvantage of outsourcing $($if applicable$).$

$

$($c$)$ Management should consider which of the following nonquantitative factors in deciding whether to make or buy the motors.

$\text{'}$he quality of their own and the supplier's motors.

he dependability of the supplier.

OWhether Mini Motor has a track record of meeting its commitments.

Whether they can depend on Mini Motor to supply motors for a number of years or whether it is attempting to use some temporarily idle capacity.

All of these.